It's a zero sum game!

February is not a month when finance ministers are normally in the good books of the middle class. With the budget round the corner, stress levels are up. It���s no different this year.

Most of the middle class likes to see the finance minister, P Chidambaram as the villain of the piece, hell bent on destroying their happiness by ending subsidies on LPG and raising petrol prices every time the international price of oil increases.

Not content with that he wants to end tax exemptions and, indeed, all the freebies the middle class in India is so accustomed to. So come February, they eye him warily, wondering what nasty surprises he has in store for them.

Fringe benefits that are not so ���fringe���, cash withdrawals, stock market transactions, almost nothing seems to escape his eagle eye. The fact that he argues his case with inexorable logic that the educated middle class finds hard to refute only makes matters worse!

So how come the same FM is suddenly in their good books? Because last week he told banks not to raise the rate of interest they charge on home loans. With household monthly budgets already feeling the pinch from rising prices, the prospect of a rise in interest rates pushing up EMIs (equated monthly installments) following the rate hike by the Reserve Bank of India had most households worried. The FM���s request (?) to banks was a sure shot way of winning their hearts.

Needless to say public sector banks promptly obliged. No prizes for guessing why. The chairmen are there at the finance ministry���s pleasure so even if it goes against all commercial sense to keep loan rates constant when deposit rates have moved up, why should they demur.

Chairmen, as the example of ONGC, Chairman RS Sharma has shown, are eminently dispensable. Agreed the abrupt removal of a top man or two might raise a bit of dust, a few papers might write harsh editorials and there might be some murmurs of discontent but once the dust has settled down, life does go on much the same as before. So why not fall in line? It���s different for private sector banks.

They don���t have to keep the government happy, especially when it entails hurting their bottom line so ICICI Bank, for instance, ignored the FM and promptly raised interest rates. Consequently not everyone may stand to benefit.

Nonetheless, the middle class is happy. The FM, they feel, is at last on their side. But are they celebrating too early? Possibly. Public sector banks may have readily fallen in line. But gone are the days when they could be indifferent about their profits. Many of them are listed and there is now much greater pressure on them to perform.

So what are they likely to do? They are likely to make up on the swings what they lose on the roundabout. What does that mean? It means they will charge a higher rate of interest on other loans to make up for being ���forced��� to keep the interest rate on home loans constant.

So even as borrowers bask in the comfort of unchanged EMIs on their home loans, they will find they have to pay more on everything else like personal loans, loans for consumer durables, credit card dues and so on.

The RBI has provided banks with a ready excuse ��� it has already hiked provisioning requirements (the amount banks need to keep aside to provide for bad loans). All other services, such as issue of bank drafts, cheque books and so on, may also become more expensive.

Corporates too may end up cross-subsidising households by paying a higher rate of interest on their loans the impact of which could well be passed on to consumers.

The truth, however clich��d it may sound, is that there is no free lunch. The FM is smart enough to know that, so are the banks. But does the average middle-class home loan borrower?